3 North Island Deer
The North Island Deer Farm
Deer farms are commonly of two main types – deer units within a mixed livestock system, and stand-alone deer farms. Deer units are generally smaller than stand-alone deer farms. This model farm sits between these two types and can be described as a “small stand-alone deer farm that is big enough to support a family”.
Theoretically situated near Rotorua in the Bay of Plenty, the model farm is 140 effective hectares in size. Opening stock for the 2005/06 season consisted of 440 red mixed-age breeding hinds, 100 rising two-year hinds (first fawners), 454 mixed-sex weaners, and 105 rising two-year stags and mature breeding/velvet stags.
Weaner hinds and stags are all carried over the winter and sold to slaughter. Half of the breeding hinds are mated to a crossbred stag. The stocking rate is now being held at the same level with the feeding programme aiming to get yearling stock to target slaughter weights in late spring when market prices for chilled venison traditionally peak. Each year around 25 selected yearling stags are retained to enter the velveting herd. This model farm does not run sheep and beef cattle.
Table 3.1: North Island Deer Model Summary, 2005/06
| Effective area | 140 ha | ||
| Opening stock wintered: | R1yr stags | 227 hd | |
| Breeding hinds (mixed-age) | 440 hd | R2yr stags | 25 hd |
| R2yr hinds (mated) | 100 hd | R3yr stags | 70 hd |
| R2yr hinds (unmated) | 0 hd | MA and breeding stags | 10 hd |
| R1yr hinds | 227 hd | Total stock units wintered | 2 197 su |
Key Points
- For the fourth consecutive year the North Island deer farming model made a disposable deficit.
- Venison revenue increased by 8 percent in 2005/06 and is forecast to increase by 9 percent in 2006/07.
- Velvet returns remained as forecast at the 2004/05 price of $44 per kilogram, but are expected to increase to $50 per kilogram in 2006/07. Industry reports concern with the timing and marketing of high value grades, which were sold at lower prices than some later re-growth velvet.
- Expenditure is forecast to increase slightly in 2006/07 due to price increases rather than additional inputs; although farmers signalled they will look to cut back where they can. As most deer farms are mixed, expenditure can be supported by other enterprises.
- The deer industry continues to be divided between those committed to deer farming, who use the lower prices as an opportunity to expand, and others, who change to alternative livestock policies or quit the industry altogether.
- Urban and lifestyle subdivisions are taking their toll on the industry as many deer blocks, particularly in the greater Waikato/South Auckland area, have permanently removed deer fencing prior to subdivision.
Table 3.2: Key Parameters of the North Island Deer Model
| 2002/03 | 2003/04 | 2004/05 | 2005/06 | 2006/07f | |
|---|---|---|---|---|---|
| Effective area (ha) | 140 | 140 | 140 | 140 | 140 |
| Opening deer stock units | 1 750 | 1 758 | 2 184 | 2 197 | 2 197 |
| Stocking rate (su/ha) | 12.50 | 12.6 | 15.6 | 15.7 | 15.7 |
| Fawning1 | |||||
| Farm average (%) | 84 | 86 | 86 | 86 | 86 |
| Mixed-age hinds (%) | 86 | 88 | 88 | 88 | 88 |
| 2-year-old hinds (%) | 75 | 77 | 76 | 76 | 76 |
| Velvet | |||||
| Farm average (includes re-growth but | |||||
| excludes yearling velvet) (kg/stag) | 2.7 | 2.0 | 2.2 | 2.3 | 2.4 |
| Mixed-age (kg/stag) | 3.2 | 3.8 | 4.0 | 4.2 | 4.2 |
| 3-year-old (kg/stag) | 2.8 | 3.5 | 3.5 | 3.7 | 3.7 |
| 2-year-old (kg/stag) | 1.6 | 1.8 | 1.8 | 2.0 | 2.0 |
| Carcass weights | |||||
| Cull 2-year-old hinds (kg) | 52 | 52 | 52 | 52 | 52 |
| 3-year-old plus stags (kg) | – | 100 | 100 | – | – |
| 2-year-old stags (kg) | 69 | 69 | 69 | 69 | 69 |
| Yearling stags (kg) | 55 | 55 | 55 | 55 | 55 |
| Gross farm revenue ($) | 132 548 | 90 918 | 103 363 | 110 632 | 121 929 |
| Net trading profit ($) | 30 700 | –6 820 | 3 985 | 233 | 9 160 |
| Disposable surplus/deficit ($) | –29 507 | –48 847 | –28 350 | –33 622 | –24 705 |
Note
1 Fawning percent is the breeding stock scanned in calf at
balance date.
Symbol
f Forecast
Climatic Factors Affecting Production
Following a favourable 2005 winter with below average rainfall in June to August and above average soil temperatures, spring started off well. Spring later cooled off in October and November causing pasture growth prior to fawning to be slightly restricted. However, pasture quality was maintained at higher levels than the previous seasons and this has seen fawn weaning weights slightly ahead of previous years. This also meant young stock feeding was maintained and resulted in yearling stag and hind killing weights at target levels at traditional sale times.
Supplementary feed could not be made until the early summer flush because the wet October delayed contractors’ schedules. The summer was variable with a dry November followed by a wet period over the New Year and then a dry February. However, overall, the rainfall provided high summer growth and a significant feed surplus. On most farms other stock were introduced to manage this feed surplus. The following high autumn growth resulted in additional weight on all animals and deer farmers were able to delay the use of crops or hold supplementary feed for later.
Pasture covers entering winter 2006 varied across the region, depending on the amount of autumn rainfall received, but farm covers were reported to be up to target levels.
Animal health challenges reported were again lower than normal, with no facial eczema damage reported and only minor reports of some cases of yersiniosis and Johne’s disease affecting herd performance. Farms with reported tuberculosis are also down from last year and death rates were slightly improved due to good stock management.
Production Figures and Forecasts
Carcass weights for venison have stayed the same but sales have been earlier due to availability of adequate killing space. The availability of killing space in 2005/06 has allowed farmers to sell surplus hinds and stags without difficulty so farmers could concentrate more on feeding capital stock. Farmers with strong relationships with processors have benefited, receiving higher returns than their spot market counterparts.
Venison sales through 2005/06 ranged, on average, from $3.15 to $4.25 per kilogram pre-Christmas, but some reported higher prices due to good sales relationships and well timed sales. Net sales from the survey farms after Christmas were $1.50 to $3.40 per kilogram for stags and $2.70 to $2.80 per kilogram for hinds.
A shortage of better-weight animals emerged in the North with some finishers being unable to obtain them, despite offers of $2.50 per kilogram. On the flip side, demand for the 40 kilogram weaners was limited. Weaner sales on average were steady at the low level prices, with average survey sales for mixed sex ranging from $88 to $135 per head.
Fawning percentage in the mixed-age hinds has been held at a constant level and is modelled at 88 percent. However, some farmers reported an increased rate of fawn survival due to higher weights last mating and better feed over summer.
Overall, stock was in good condition during 2006 and farmers anticipate fawning results will be pleasing in 2006/07. Weaning weights for 2006 were generally ahead of 2005 and stock were able to be sold as planned.
Financial Position of the Deer Farm
Review of 2005/06
Revenue
Gross farm revenue increased by 7 percent in 2005/06 to $110,632, reflecting an increase in venison returns.
Venison
Average slaughter carcass weights in 2005/06 equalled those of 2004/05. However, sales were made earlier and matched the higher value grades offered by processors.
The model farm recorded an 8 percent increase in venison returns compared with the 2004/05 season.
Velvet
The 2005/06 average price received for velvet was static at last year’s price of $44 per kilogram but farmers made slight gains in velvet due to better weights per head.
The model farm experienced a 5.5 percent increase in velvet revenue during 2005/06 resulting from improved weight per head, rather than any real market improvement in prices. Total revenue received from velvet in 2005/06 was $17,006 compared with $16,112 in 2004/05.
Other
In order to reflect the number of deer farms that are running ewes or young beef cattle (up to 20 percent of total stock units) to assist in pasture management, it is important to include an estimate of the potential revenue these stock units could contribute. At an average cash farm surplus of $27.19 per stock unit (taken from the 2005/06 Waikato/Bay of Plenty intensive sheep and beef model budget), the potential net revenue from these 437 stock units is $11,882.
Expenditure
Cash farm expenditure increased by 14 percent to $619 per hectare in 2005/06, despite North Island deer farmers attempting to tighten spending to compensate for the continued low returns for both venison and velvet. At $619 per hectare, expenditure uses 78 percent of gross farm revenue. At this level, farmers without support from other activities (such as off-farm income, investments, or other livestock) are being increasingly squeezed to modify their existing policies or quit the deer farming industry. Deer industry representatives state there has been a 30 percent decrease in small, stand-alone deer farms from last year’s figures and this may be a reflection of the imbalance between revenue and expenditure.
Key increases in expenditure occurred in casual wages (43 percent),
communication (33 percent), fuel
(20 percent), fertiliser (19 percent), vehicle costs excluding fuel (8
percent), electricity (7 percent), and rates (6 percent).
Communication costs increased as a result of additional technology like new cellphones and broadband connections being added to the farm budget.
Farmers continue to carry out planned fertiliser applications. Fertiliser expenditure increased in 2005/06 as a direct result of higher pricing rather than additional applications. Deer farmers have indicated that although farm expenditure needs to be tightened, fertiliser expenditure is being maintained as an essential part of the farming system.
Re-grassing is still prevalent in the deer system to maintain quality feed. However, there is increased reliance on brassica cropping both to break the pest cycle when re-grassing and to provide a cheap quality supplement more suited to deer than any other stock type. While budgets show re-grassing is still occurring in deer farms, last year’s forecast 60-plus percent rise in re-grassing expenditure did not eventuate, as some started to reduce their re-grassing programme due to cost or because of the completion of development plans.
Animal health expenditure increased by 10 percent in 2005/06 due to higher input prices. Industry representatives report deer work has shrunk for vets as returns are still too low to validate the cost of using a vet. Breeding expenses are up 8 percent due to inflationary costs but overall they continue to remain low due to farmers’ lack of pregnancy scanning.
Farmers have significantly decreased the cost of bought-in feed by changing both the type of feed and the amount used. Feed (other costs) remained in this year’s budget as farmers continued to source feed alternatives such as kiwifruit substituting for maize grain.
Repairs and maintenance expenditure, although up slightly, did not reach the same level as the 2003/04 year, as farmers deferred any major repairs and maintenance after carrying out planned expenditure in previous years.
Personal drawings remained the same as last year’s $35,000 and development costs remained at $2,500 as most established deer farmers completed planned development.
Capital purchases remained at $2,500 as machinery replacement continued despite low cash income.
Net Result
Net trading profit before tax for the model decreased from $3,985 to $233 in 2005/06. This was mainly due to revenue increases being less than increases in expenses for 2005/06.
Off-farm income increased 25 percent in 2005/06 to $25,000 as many farmers sought full-time work off-farm to supplement income. Although contributing positively to the overall net cash change for the farm, the increased level of off-farm income means many farmers are neglecting work on their own properties in favour of earning money elsewhere. The net cash change for the model farm for 2005/06 remains negative at -$8,622, slightly down on 2004/05.
Land values continue to increase throughout the North Island, with many deer farmers seeing the prospective capital appreciation as a saving grace in the face of low returns. The model farm, based near Rotorua, experienced a 10 percent increase in value to $16,500 per hectare, but some farms in the North Island have experienced up to an 18 percent increase in value as competition from alternative land uses puts pressure on the land market.
Forecasts for 2006/07
Revenue
Gross farm revenue is expected to increase by 10 percent to $121,929 in 2006/07 as a result of higher venison returns.
Venison
Venison sales revenue for 2006/07 is expected to rise by almost 9 percent to $109,849. Expectations for venison are generally optimistic, with most farmers forecasting at least a $20 per head increase in venison returns, with the schedule following closely between $4.50 and $5.50 per kilogram with a forecast peak chilled return, subject to currency and fuel costs expected at close to $6.00 per kilogram for the prime 50–60 kilogram carcasses.
Velvet
The model budget velvet revenue is forecast to change in 2006/07, with farmers again budgeting for increased velvet returns of $50 per kilogram. This increase is expected due to improved marketing and the recent export agreement with China.
Expenditure
Total cash farm expenditure is forecast to increase 3 percent in 2006/07.
Key areas of expenditure forecast to increase are: fuel (17 percent), insurance (10 percent), rates (8 percent), and weed and pest control (7 percent).
Other feed purchased remains in the forecast budget at a low level, but farmers will look to cut this cost if margins are tight next year.
Development and capital purchase costs remain in the forecast as farmers are optimistic that the deer industry is on its way up.
Net Result
Net trading profit before tax is forecast to $9,160 in 2006/07 as a result of expected improved returns and careful budgeting. Farmers are expecting a 0.3 percent increase in interest rates in 2006/07, lifting the rate to 8.3 percent.
With the forecast improved prices for venison and velvet, and the sustained level of personal drawings and off-farm income, the net cash change is forecast to return to positive figures for the first time in years, at $295.
Farmers anticipate land values to settle in 2006/07.
Figure 3.1: North Island Deer Farming Profitability Trends
Symbol
f Forecast
Issues and Trends
Although the deer industry is still experiencing low prices, lower sheep returns have made deer farming look more attractive. In general, deer farmers are still passionate about the future of deer and its products. Some are using the current low market to their advantage by increasing deer fenced areas and purchasing extra deer, often of high genetics, at lower entry prices. The comment has also been made that some farmers are beginning to better understand the Cervena market and are optimistic they will get higher returns in the future. Loyal deer farmers are increasingly focusing on deer breeding and genetics to improve production and reduce disease within populations.
Farmers are aware of the necessity of animal welfare, employment and occupational health and safety regulations but are concerned with the continual increasing cost of compliance. This cost is harder to bear with the ever-decreasing returns for deer.
While some farmers remain committed to deer, others are choosing to quit the industry. Several factors have influenced the exodus, such as farmers’ increasing age, stage of life, and poor financial returns. Many are taking advantage of the increase in land values, and are selling for subdivision or alternative land uses. This is particularly noticeable in the Waikato area, with deer fences being removed and land subdivided for popular rural residential sites.
Farmers have also abandoned principal repayments as they use the increasing land values to enhance their equity in their properties.
Latest statistics from the 2005 Agricultural Production Census (June 2005 numbers) indicate a drop of 10 percent in total deer numbers in the North Island compared with last year’s figures. Of the national herd residing in the North Island the distribution through the main areas are as follows: 26 percent Waikato, 22 percent Hawkes Bay, 27 percent Manawatu/Wanganui, and 11 percent each in the Bay of Plenty and Gisborne regions.
Environmental matters are well recognised and continue to be a focus of deer farming with ongoing work being undertaken to minimise the physical impacts of deer on fence-line erosion. Interest remains in deer for a future alternative stock type in the Taupo region, where farmers are planning to reduce nitrogen loadings.
The problem of sourcing and retaining suitable labour continues to impact on the industry. Many farmers struggle to find people who are willing to deal with the physical aspects of farming stags and who are capable of managing or leasing deer farms. In general, if farmers can find people with the skills necessary to manage deer, they are willing to invest in training, such as velvet removal accreditation, in order to retain quality staff. Larger farming corporates, such as Landcorp and some Maori farms continue to invest in appropriate training for deer staff.
Table 3.3: North Island Deer Budget
| 2005/06 | 2006/07f | |||||
|---|---|---|---|---|---|---|
| Whole | Per | Per | Whole | Per | Per | |
| Farm | ha | su | farm | ha | su | |
| ($) | ($) | ($) | ($) | ($) | ($) | |
| Revenue | ||||||
| Deer sales | 101 126 | 722 | 46.03 | 109 849 | 785 | 50.00 |
| Velvet1 | 17 006 | 121 | 24.88 | 19 580 | 140 | 28.65 |
| Other farm income | 0 | 0 | 0.00 | 0 | 0 | 0.00 |
| Less | ||||||
| Deer purchases | 7 500 | 54 | 3.41 | 7 500 | 54 | 3.41 |
| Gross farm revenue | 110 632 | 790 | 50.36 | 121 929 | 871 | 55.50 |
| Cash farm expenditure | 86 661 | 619 | 39.45 | 89 216 | 637 | 40.61 |
| Interest | 16 000 | 114 | 7.28 | 16 600 | 119 | 7.35 |
| Rent and/or leases | 0 | 0 | 0.00 | 0 | 0 | 0.00 |
| Cash farm surplus | 7 971 | 57 | 3.63 | 16 113 | 115 | 7.33 |
| Stock value adjustment | 0 | 0 | 0.00 | 0 | 0 | 0.00 |
| Minus depreciation | 7 738 | 55 | 3.52 | 6 953 | 50 | 3.16 |
| Net trading profit | 233 | 2 | 0.11 | 9 160 | 65 | 4.17 |
| Taxation | 1 593 | 11 | 0.73 | 818 | 6 | 0.37 |
| Net trading profit after tax | –1 360 | –10 | –0.62 | 8 342 | 60 | 3.80 |
| Allocation of funds | ||||||
| Add back depreciation | 7 738 | 55 | 3.52 | 6 953 | 50 | 3.16 |
| Reverse stock value adjustment | 0 | 0 | 0.00 | 0 | 0 | 0.00 |
| Drawings | 35 000 | 250 | 15.93 | 35 000 | 250 | 15.93 |
| Principal repayments | 0 | 0 | 0.00 | 0 | 0 | 0.00 |
| Development | 2 500 | 18 | 1.14 | 2 500 | 18 | 1.14 |
| Capital purchases | 2 500 | 18 | 1.14 | 2 500 | 18 | 1.14 |
| Disposable surplus/deficit | –33 622 | –240 | –15.30 | –24 705 | –176 | –11.25 |
| Other cash sources | ||||||
| New borrowing | 0 | 0 | 0.00 | 0 | 0 | 0.00 |
| Off–farm income | 25 000 | 179 | 11.38 | 25 000 | 179 | 11.38 |
| Other cash income | 0 | 0 | 0.00 | 0 | 0 | 0.00 |
| Net cash change | –8 622 | –62 | –3.92 | 295 | 2 | 0.13 |
| Assets and liabilities | ||||||
| Farm, forest and building (opening) | 2 310 000 | 16 500 | 1 051.48 | 2 310 000 | 16 500 | 1 051.48 |
| Plant and machinery (opening) | 51 588 | 368 | 23.48 | 46 350 | 331 | 21.10 |
| Stock valuation (opening) | 172 084 | 1 229 | 78.33 | 172 084 | 1 229 | 78.33 |
| Total farm capital | 2 533 672 | 18 098 | 1 153.29 | 2 528 434 | 18 060 | 1 150.91 |
| Total debt opening | 200 000 | 1 429 | 91.04 | 200 000 | 1 429 | 91.04 |
| Equity | 2 333 672 | 16 669 | 1 062.26 | 2 328 434 | 16 632 | 1 059.87 |
Note
1 Per stag su.
Symbol
f Forecast
Table 3.4: North Island Deer Expenditure
| 2005/06 | 2006/07f | |||||
|---|---|---|---|---|---|---|
| Whole | Per | Per | Whole | Per | Per | |
| Farm | ha | su | farm | ha | su | |
| ($) | ($) | ($) | ($) | ($) | ($) | |
| Farm working expenses | ||||||
| Permanent wages | 0 | 0 | 0.00 | 0 | 0 | 0.00 |
| Casual wages | 5 000 | 36 | 2.28 | 5 000 | 36 | 2.28 |
| ACC | 279 | 2 | 0.13 | 159 | 1 | 0.07 |
| Animal health | 5 500 | 39 | 2.50 | 5 500 | 39 | 2.50 |
| Breeding | 650 | 5 | 0.30 | 650 | 5 | 0.30 |
| Electricity | 2 600 | 19 | 1.18 | 2 700 | 19 | 1.23 |
| Feed (hay and silage) | 6 600 | 47 | 3.00 | 6 600 | 47 | 3.00 |
| Feed (feed crops) | 3 300 | 24 | 1.50 | 3 300 | 24 | 1.50 |
| Feed (grazing) | 0 | 0 | 0.00 | 0 | 0 | 0.00 |
| Feed (other) | 1 300 | 9 | 0.59 | 1 400 | 10 | 0.64 |
| Fertiliser | 22 501 | 161 | 10.24 | 22 761 | 163 | 10.36 |
| Lime | 1 584 | 11 | 0.72 | 1 584 | 11 | 0.72 |
| Freight (not elsewhere deducted) | 600 | 4 | 0.27 | 600 | 6 | 0.36 |
| Re–grassing costs | 1 848 | 13 | 0.84 | 1 862 | 13 | 0.85 |
| Weed and pest control | 1 500 | 11 | 0.68 | 1 600 | 11 | 0.73 |
| Fuel | 6 000 | 43 | 2.73 | 7 000 | 50 | 3.19 |
| Vehicle costs (excluding fuel) | 4 200 | 30 | 1.91 | 4 500 | 32 | 2.05 |
| Repairs and maintenance | 7 500 | 54 | 3.41 | 7 500 | 54 | 3.41 |
| Communication costs | ||||||
| (phone and mail) | 2 400 | 17 | 1.09 | 2 400 | 17 | 1.09 |
| Accountancy | 2 300 | 16 | 1.05 | 2 400 | 17 | 1.09 |
| Legal and consultancy | 1 000 | 7 | 0.46 | 1 000 | 7 | 0.46 |
| Other administration | 0 | 0 | 0.00 | 0 | 0 | 0.00 |
| Rates | 5 200 | 37 | 2.37 | 5 600 | 40 | 2.55 |
| Insurance | 3 000 | 21 | 1.37 | 3 300 | 24 | 1.50 |
| Water charges (irrigation) | 0 | 0 | 0.00 | 0 | 0 | 0.00 |
| Other expenditure | 1 800 | 13 | 0.82 | 1 800 | 13 | 0.82 |
| Cash farm expenditure | 86 661 | 619 | 39 | 89 216 | 637 | 41 |
| Calculated ratios | ||||||
| Economic farm surplus (EFS1) | –40 104 | –286 | –18.25 | –30 524 | –218 | –13.89 |
| Cash farm expenditure/GFR2 (%) | 78 | 73 | ||||
| EFS/total farm capital (%) | –1.6 | –1.2 | ||||
| EFS less interest and lease/equity (%) | –2.4 | –2.0 | ||||
| Interest + rent + lease/GFR (%) | 14.5 | 13.6 | ||||
| EFS/GFR (%) | –36.2 | –25.0 |
Notes
1 EFS (or Earnings before interest and tax) is calculated as
follows: gross farm revenue plus change in livestock values less working
expenses less depreciation less wages of management (WOM). Wages of management
are calculated as follows: $31,000 allowance for labour input plus 1 percent of
total capital as managerial reward. An upper limit for WOM of $75,000 has been
set.
2 Gross farm revenue.
Symbol
f Forecast
Contact for Enquiries
Farm Monitoring Programme Manager
Monitoring and Evaluation
MAF Policy
PO Box 2526
Wellington
NEW ZEALAND
Phone: +64 4 894 0623
Fax: +64 4 894 0741
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